Pharma tariffs would hit uninsured Americans the hardest, experts warn

Tariffs on pharmaceuticals imported into the U.S. will lead to shortages and higher prices for patients, experts warn.

During a Cabinet meeting last week, President Donald Trump said a pharma tariff of up to 200% is coming “very soon." Shares in overseas drug manufacturers have barely flinched, however, suggesting investors are now immune to the president’s threats.

Yet, even if tariffs fell short of 200%, they could still wreak supply chain havoc, experts warn, with patients, insurers and the government all highly exposed to the impact.

That's because the U.S. is heavily dosed up on cheap generics made overseas — more so than any other country. Over the past decade, pharmaceutical imports have more than doubled in value, according to U.S. customs data, becoming the country's second largest import. Demand for cheaper generics explains the surge: Non-branded drugs now account for about 90% of prescriptions filled in the U.S, with the bulk of these coming from China and India. Accounting for both the base Active Pharmaceutical Ingredients (APIs) and the finished products, these two countries supply 70-80% of America’s drugs.  

Prescriptions would cost more, take longer

Manufacturers of branded drugs enjoy higher margins and therefore have room to absorb tariff-related costs, explains Margaret Kyle, professor at the Center for Industrial Economics. They could, for example, cut back on research and development to offset costs, she says.

Cheaper generics lack this buffer. “Since margins are already very thin, the manufacturers would almost certainly pass them on to payers,” says Kyle. 

While some generic manufacturers may absorb some costs in the short term, most will be passed on, agrees Stephen Ezell, vice president of global innovation policy at the Information Technology and Innovation Foundation (ITIF). “Higher prices will strain programs such as Medicare and Medicaid, push up premiums for those with private health insurance, and increase patient out-of-pocket expenses,” he says.

"There's going to be millions of more people who can't afford their medications,” which means more people skipping prescriptions, says Ameet Sarpatwari, assistant professor of population medicine at Harvard Medical School.

“That's going to have downstream consequences, meaning that [taxpayers] are going to actually pay even more, because their health conditions are going to get worse," he says. Costs will be transferred to emergency rooms as a consequence of untreated illness, he says.

Without an insurer to share the costs with, the uninsured will be most exposed to price increases, Kyle adds. An estimated 26 million Americans are uninsured — about 8% of the population — according to a Commonwealth Fund survey. An additional 16 million are expected to be uninsured by 2034, due to Medicaid cuts in the Trump administration’s One Big Beautiful Bill Act, according to the Congressional Budget Office.

What’s more, for those who are able to retain their Medicaid, tariffs will reduce purchasing power, says Ezell, jeopardizing access. "The combination of Medicaid budget cuts and tariffs could lead to less coverage and higher costs, disproportionately hurting the most vulnerable patients," he says.

Tariff-related costs may force some generic drug companies to “abandon production of essential inexpensive medicines,” according to a recent HealthAffairs report. Drugs like antibiotics and blood pressure medications are “vulnerable" to this, already facing price pressures and shortages, Ezell adds. 

Should tariffs force a manufacturer to abandon certain drugs, patients simply switching to a branded alternative is neither “affordable nor feasible,” says Ezell, as generics typically have a 80-85% price discount. He notes oncology as a prime example of where a lack of generic alternatives would result in critical gaps in access and treatment continuity.

Domestic manufacturing?

Trump's tariffs are aimed at encouraging domestic manufacturing. Should this outcome arise, it wouldn't be cheap nor easy.

"India dominates generic production because of mature infrastructure, skilled labor, and cost efficiency," says Ezell. “Building equivalent capacity in the U.S. requires massive investment, regulatory streamlining, and time."

Relying on domestic manufacturers to supply generics would also come with high costs, says Kyle. 

While drug prices are notoriously high in U.S. relative to the rest of the world, generics are actually cheaper. America has one of the most competitive generic drug markets in the world because once a drug goes off-patent, multiple manufacturers can quickly enter the market, leading to aggressive price competition.

“This is a rare example of the U.S. health system delivering lower costs,” says Kyle. Relying on domestic manufacturers could upend this discount as they'll face higher labor costs and tariffs on APIs, she says. Equally, “shielding them from foreign competition blunts the incentive for them to be more efficient."

Quality concerns

Recent cuts to the Food and Drug Administration (FDA) may also amplify the impacts of tariffs. The FY2026 budget proposes a 5.5% cut to the FDA, while around 3,500 agency jobs were eliminated in March. This will slow the approval process for new facilities, says Kyle, meaning that re-shoring would face additional headwinds compared to previous years.

What’s more, the quality of overseas generics has come under increasing scrutiny lately, leading to the FDA announcing in May that it's expanding its unannounced overseas inspections. Tariffs may worsen conditions in factories at a time when the agency has fewer workers to perform checks.

“If generic manufacturers, who are already facing tight margins, are further squeezed by tariffs, they may be pushed to reduce their workforce, defer equipment maintenance, and other actions, which could negatively impact drug quality,” says Ezell.

A recent study by Ohio State University found that generics made in India are linked to significantly more “severe adverse events” for patients who use them than domestic equivalents. Take the example of Granules India: In December the FDA filed a warning letter to the drug maker for failing to remediate the “significant contamination” inspectors found at its Telangana plant, such as bird droppings and feathers near the air handling unit, and “numerous gaps in the exterior walls.” Last week, Granules was forced to recall more than 33,000 bottles of blood lowering medication in the U.S.

Quality violations like these are a symptom of the broader race-to-the-bottom when it comes to generics. Facing increasing competition, many manufacturers have already discontinued certain products, while others have left the market altogether, explains Sarpatwari. And consolidated supply chains are less agile, he adds.

"Already, we have a suboptimal number of generic manufacturers producing drugs. So, it's not that easy to right the ship once [one] goes out and takes with it a drug that no one else makes," he says. Filling shortages would require another company to step in, he adds, but whether any would be willing remains to be seen.